If you’re like most car shoppers, you’ll most likely pay for your car with a loan. You may prepare for your purchase by looking up car reviews and figuring out your budget, but you can also take steps to reduce the interest rate you’ll pay. Learning how your interest rate is determined and what factors influence it can help you save money because you may be able to change some of them.

How Your Rate Is Determined

Some of the factors that influence your auto loan’s interest rate include:

the size of your loan and down payment. If you borrow less, your interest rate is more likely to be lower. Paying a larger down payment also will increase the likelihood of getting a lower rate.

the length of the loan. Typically, shorter-term loans have lower interest rates.

the age of the car. Used car loans tend to have higher interest rates than those for new cars.

What Influences Your Interest Rate the Most?

The single greatest factor that influences your auto loan’s interest rate is your credit score. What your credit score number means and how it’s categorized depends on the credit bureau issuing it. Experian®, for example, rates scores using two types of credit scores commonly used by lenders:*

These categories act as guidelines for the interest rates that are typically approved for the corresponding score range. So people with an exceptional credit score tend to be offered the lowest rates while people with lower scores are generally offered higher rates.

How to Boost Your Credit Score

You may be wondering if you need a specific credit score to buy a car. Although there’s no magic number that’s standard among all lenders, if you’re not certain where you stand, order a copy of your credit report three to six months before requesting an auto loan. That way, you can work to improve your credit if necessary. How can you improve your score? Follow these tips:

Look over your report for mistakes. After ordering your credit report, review the information for any mistakes that could be lowering your score and contact the reporting agency to have the information corrected.

Always pay your bills on time. Even if you’ve already missed payments, making consistent payments from now on will help your score recover over time.

Pay off your accounts. Do you have any accounts with small balances? It’s best to pay those off because credit bureaus may dock your score for having too many accounts with outstanding balances.

Be strategic about applying for new loans or credit cards. Your credit score may be negatively impacted if the average age of your accounts is too young. However, if you have almost no credit history, it may be wise to open a credit card now so you can build a history of timely payments.

Be patient. You may need more than a few months to improve your credit. Be aware that if your credit score is low due to multiple missed payments, bankruptcy or similar circumstances, it can take more time to rebuild your credit. If this is your situation, you may still qualify for an auto loan from Navy Federal Credit Union. We’ll consider your relationship with our credit union as a whole in addition to your credit score—you’re not just a number here!

If you’re ready for an auto loan, Navy Federal Credit Union can help. Learn more about our auto loan options for new and used vehicles.

This article is intended to provide general information and shouldn't be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.

Navy Federal Information

Mission Statement

Since 1933, Navy Federal Credit Union has grown from 7 members to over 8 million members. And, since that time, our vision statement has remained focused on serving our unique field of membership:

“Be the most preferred and trusted financial institution serving the military and their families.”

Navy Federal conducts all member business in English. All origination, servicing, collections and marketing materials are provided in English only. As a service to members, we will attempt to assist members who have limited English proficiency, where possible. Military images used for representational purposes only; do not imply government endorsement. - Android™, Google Pay™ and Google Play™ are trademarks of Google LLC. The Android Robot is reproduced or modified from work created and shared by Google and used according to terms described in the Creative Commons 3.0 Attribution License. Apple™, Apple Pay™, iPhone™, iSight™, Wallet™, Touch ID™ and iTunes™ are trademarks of Apple, Inc., registered in the U.S. and other countries. App StoreSM is a service mark of Apple, Inc. - Amazon, Kindle, Fire and all related logos are trademarks of Amazon.com, Inc. or its affiliates.

APY = Annual Percentage Yield, APR = Annual Percentage Rate
+Rates are based on an evaluation of credit history, so your rate may differ.
++Rates are variable and based on an evaluation of credit history, so your rate may differ.
*Message and data rates may apply. Terms and Conditions are available.
♦Terms and conditions are applied to gift cards.